The Damian Mc Bride Memorial Budget and the Tory Tax trap

You have to say one thing for Labour. They still have an icy grip over journalists on their papers and in the BBC. During a very busy day yesterday my phone did not stop ringing from journalists acting as Labour’s poodles, wanting me to condemn the Tory leadership or to say things on top tax rates that they could use to condemn the Conservatives generally or create a “Tory split” story.

Sorry boys. That Labour game doesn’t work. This budget should be a time for strong and positive measures to get the UK out of the economic black hole this government has taken us into. It should not be about playing stupid political games and trying to paint the Tories into a corner. I want David Cameron to win the election, and I want an election as soon as possible. We cannot afford to go on like this. Clearly Number 10 has learnt nothing from the Mc Bride affair and think it is business as usual. The Chancellor has demeaned himself and the budget by seeking the 50p tax headlines and anti Tory story in the way Labour’s spinners did this week.

What is my view? That must be obvious from everything I have written over the years. I did advise Margaret Thatcher to both increase the amount of tax the rich paid, and increase the proportion of income tax paid by the rich when she was in government. Her excellent reforming Chancellor, Nigel Lawson, did so by cutting the top rate of tax from Labour’s penal 83% on earned income and 98% on savings income to 40%, a competitive international rate for those days. As a result of their lower rates the amount of tax paid by the rich rose, and rose as a proportion of the total.

If Labour were serious about getting more tax from the rich, instead of playing class war games, they might like to ask themselves what rate of income tax will maximise the number of rich people here, and the amount of business and investment they undertake. That should be the only important question at this time of national financial crisis. The UK’s tax rates cannot be settled in a vacuum. We need to become more successful as an international trading economy, and that means competitive tax rates on personal as well as company income and gains. Meanwhile for those Labour poodles still in doubt, I support the Conservative leadership against these juvenile Labour antics.

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12 Comments

  1. Stuart Fairney
    Posted April 24, 2009 at 6:08 am | Permalink

    Yes, it’s hard to believe no-one in government understands the Laffer curve. It’s partially scorched earth to destroy the economy for Cameron to take over; partially old politics to please the nasty old core vote (did you see some of their front benchers grinning when 50% was announced? rather put me in mind of the Jacobins!) and partially, as you say, a tory trap.

    What it is not, is something to revive the economy.

  2. Johnny Norfolk
    Posted April 24, 2009 at 6:08 am | Permalink

    And the small print about the budget continues to pour out whilst the media are only interested in doing the Tories down.
    If the media led by the BBC were more on Labours back about what they are doing instead of trying to wrong foot the Tories they would do us all a service.

  3. Donna W
    Posted April 24, 2009 at 6:38 am | Permalink

    Gordon Brown keeps banging on about the credit crunch being global and the need for a global response. Global, global global – except when it comes to tax. Then it seems perfectly OK for him to ignore global conditions. Our top rate of tax on people earning more than £150,000 is now one of the highest in the developed world.

    Not everyone highly paid was a banker: in the private sector, these people are generally highly skilled, entrepreneurs, innovators and people who generate jobs and wealth for the country. Gordon Brown has just signalled to them that they might just as well take their skills, abilities and money and move overseas…. because they operate in a global economy.

    What he should have been doing is capping senior civil service and local authority pay. Public ‘servants’ should not be earning the kind of sums that attract the top rate of tax.

    • chris southern
      Posted April 24, 2009 at 12:45 pm | Permalink

      In Brownian speak, global means i didn’t do it.
      In Brownian speak, fair tax means, political manouvering.
      In Brownian speak, less tax means, taxing the lowest earners for all they have.

      brought to you by the modern public dictionary. 😀

  4. alan jutson
    Posted April 24, 2009 at 6:55 am | Permalink

    How sad that the Labour spin doctors are still in operation.
    You would have thought that by now they would have realised that after 12 years, THE TRUTH IS OUT.
    The whole Labour lie of Prudence, and living within your means, is a sham and has been exposed.
    Once again they have bust the economy, this time for many generations.
    The so called “investment” (borrowing beyond your means) for the future has blown up in their faces.
    Its a wonder that 27% of the population (if newspaper reports are to be believed) still support them, but then perhaps that 27% do not have to contribute to paying for this 12 year Social experiment.
    As time runs on the real figures will come out, as will the potential real cost of the last 12 years, the figures will be worse, and so will be the tax rises and service cuts needed to have to pay for it.
    John
    You are correct, the Tories (for I cannot see anyway this lot will get in again) have been left with a monumental hill to climb, and it would be foolish to try and comment on policy now, when you do not have the final figures.
    All I would say to DC is be honest with the Public, tell them it will be very difficult for very many years, and we will all now have to contribute to clear up this mess, but action can only be planned and be started when you see the true state of the accounts.
    To make promises now would be premature.
    The worst is still to come out.
    The sad fact was that Parliament was not even involved, our system failed.
    A lesson here for the Politicians, the media and the population.

    • brian kelly
      Posted April 24, 2009 at 11:49 am | Permalink

      If the conservatives start to hammer home now the full dire condition of our economy and the extremely severe measures that they would need to take in regard to the public sector in terms of real cutbacks and economies in order to reduce and eventually eliminate the country’s indebtedness as quickly as possible [how much would this save in interest payments on debt alone?] . And explain why they must be taken – that is, to stimulate to the maximum possible extent the productive private sector. To explain that they believe that this will be the shortest route to the country’s recovery – perhaps ahead of most nations and perhaps a very vibrant recovery – and that these actions would be to the benefit of every single sector of our society after the initial pain. If the conservatives put this case plainly the electorate have a very clear choice. They choose still to vote the conservatives in and they have a mandate. They vote Labour in and the position will worsen such that after a forced early election, the conservative will have an even stronger mandate.

  5. Ian Jones
    Posted April 24, 2009 at 7:44 am | Permalink

    Its just a shame Boris isnt on the same hymn sheet. Seems the Mayor has higher aspirations.

  6. Pete Chown
    Posted April 24, 2009 at 10:51 am | Permalink

    I believe I am correct that the 50% tax rate will raise virtually no money, even if it doesn’t cause an increase in avoidance or evasion. There simply aren’t enough people with that level of income. On the other hand, it will harm the economy by dissuading talented people from working and investing here.

    Labour must know this. All I can assume is that populist games are seen as more worthwhile than improving the economy–even at a time like this. I’m actually quite shocked. Surely the point of being a politician is that you want the satisfaction of leaving the country better than you found it. If you get re-elected but at the cost of harming the country, is there really any point?

    I suppose Brown was telling the truth when he said he would “do whatever it takes.” He will, indeed, do whatever it takes to get re-elected.

  7. Cliff.
    Posted April 24, 2009 at 11:32 am | Permalink

    In my opinion, the fairest way to increase taxation is through VAT. Using VAT ensures that those that spend the most money, or have the most money to spend, will pay more towards Labour’s economic mismanagement fund.

    Those on high salaries already pay more tax, because they earn more. Those on high salaries can also afford to instruct accountants to help them pay the least amount of tax they have to. Tax avoidence is legal, tax evasion is not.
    I suspect most people would pay tax at a level they think is fair without too much fuss. Currently, the tax burden is too high in this country and we are likely to see people start to abandon the sinking ship. Those that go to university come out with huge debts, which is no way to start adult life. Those graduates are the most likely to become the top earners, so in effect they will suffer a double whammy.
    If I was a young person, just coming out of University with a good degree that I had been forced to fund myself, I would feel no loyalty to this country and would be very mercenary and go somewhere where they valued my qualification and skills and would not rip me off tax wise.
    I feel it is a very shortsighted policy and typical of Labour….We used to call it the politics of envy.

  8. Denis Cooper
    Posted April 24, 2009 at 11:49 am | Permalink

    The mass media have a hell of a lot to answer for. And, no, it isn’t just the BBC; ITV and Sky are just as much to blame, as are most of the national newspapers.

    OK, so we’re not compelled to finance them, while by law we’re forced to finance the BBC if we want to receive any TV broadcasts; but it does make me wonder whether privatising the BBC would actually solve the problem.

    For journalists “stories” are their stock in trade, without which they eventually lose their livelihoods; the governing party can choose to give favoured journalists “stories”, while denying them to other journalists; therefore ruthless, anti-democratic politicians can exercise a large measure of control over the ostensibly “free” press simply through their control over the supply of “stories”.

    But ultimately who pays for these “stories”, which the governing party can dispense to selected journalists as an act of patronage? If they relate to public affairs, then the general public has paid for them to be generated; but the whole purpose of the system is to dupe the general public.

  9. Emil
    Posted April 24, 2009 at 3:33 pm | Permalink

    The biggest con trick is with their removal of personal tax allowances they’ve hit people earning £100K, and the sham “consultation” on the spiteful proposal to tax earners over £150K on employers contribution to pensions fund have largely escaped our docile, useless, MSM.

    Meanwhile the same commentators don’t pick up on a business budget that increases NI at such a modest rate. Pravda and Tass would be proud.

  10. D K McGREGOR
    Posted April 25, 2009 at 9:23 am | Permalink

    As I am the proud owner of a standard poodle and one of your your most devoted readers , I would appreciate you not associating the terms Labour and poodle . My aristocratic buffoon is admired by all who meet him , loves to play and generally enjoys his life to the full , hardly the aspects that Labour and its minions are known for. If you insist on the dog metaphor could I suggest Portuguese water dogs? Keep up the good work but lay off the poodles!

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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